What is decentralization?
It could be that you’re reading this with a clear idea of what decentralization is and what it means for the future. Perhaps you’re already in the blockchain industry. Or you’re none of those things and would like to know more about decentralization and how it affects you and yours. Whether you’re nominating, validating, staking, or a total novice, we thought we’d spend a few minutes explaining what decentralization means to us.
Wait, what’s a validator?
Glad you asked. An active participant in a blockchain, validators are responsible for verifying (validating) transactions. We’ll talk more about validation going forwards, but for now, simply consider crypto validators as the folks who process the payments in decentralized networks, resulting in the production of blockchain rewards.
The basics of decentralization
The decentralization of blockchain infrastructure creates networks that no single entity can control. That means big companies can no longer govern data, messages, or communications (to name but a few). Decentralization means that individuals have a say in the operation of their services. Society is on the brink of some vast paradigm shifts, and while decentralization is not the answer to every question, there can be no doubt that it’s the antidote to many of today’s broken systems.
Within a blockchain network, decentralization means that the network runs on many validators operated by a diverse group. If the network becomes centralized into a small group of validators, a small group of large entities can dominate the governance, defeating the purpose of having a blockchain. It makes zero sense to create a transformative technology founded on decentralization and then neglect to form a solid backbone for your decentralized network.
Why does decentralization infrastructure matter?
Decentralization makes a system more resilient and resistant to cyber-attacks or pseudospoofing. When talking about decentralized systems, we often refer to the infrastructure as “nodes” or “validators,” which live in data centers worldwide. Large organizations run some, while others are run by smaller groups or individuals supporting a network. Nodes operated by large organizations are centralized from the point of view of a company or individual controlling a series of servers. So, in theory, if that company shuts down, those nodes will cease to exist, meaning that the security of the said network will become weaker and susceptible to cyber-attack or a 51% attack.
So we need to aim to decentralize the infrastructure of any network because truly decentralized networks cannot be led, halted, or stopped by anyone or anything. Ultimately, the people and organizations involved in the network define its security.
PoW and PoS versus DPoS
Proof of work (PoW) networks and Proof of stake (PoS) use different mechanics to secure the network. Proof of Work uses a mathematical algorithm with a random number that finds a solution in the form of a hash. This hash becomes the new block in a blockchain. PoW networks (Bitcoin, Ethereum, and 99% of other blockchain networks) have a high level of energy consumption. As in the Polkadot and Kusama networks, delegated proof of stake (DPoS) works based on money securing the network. Nominators under these mechanics choose up to 16 validators to nominate their money. This nomination is in return for a reward agreed upon through a consensus mechanism. The energy consumption of DPoS networks is a fraction of that used by PoW networks, making these networks the preferred green technological choice.
Why is it important to choose an honest validator in DPoS networks?
Your choice of validator can make the network either stronger or weaker. Stronger if you base validator selection on validator involvement with governance or reinvesting one hundred percent into the ecosystem through open source development, marketing, and communications etc. The weakness comes from validators riding an opportunistic wave of profits just because they got there first.
The choice is yours
Choosing a validator who has professionally managed infrastructure is a must. Running multiple networks on the same ecosystem is a good indication of their knowledge and level of investment in the network’s well-being. Remember, they’re running servers that you are supporting with your money. If something goes wrong, you will share the pain and the losses. If you’re already working with validators, talk to your validator, and ask them about this in more detail.
The blockchain space is alive with validation and nomination services. Ultimately, consider choosing validators with few machines running in a network. We don’t want to assist validators to get too big, as smaller validators are more beneficial to the ecosystem. If you’re interested in maximizing your profits through nominating, then Two Pebbles can help you. We also run validators as a service for those with enough funds to self-stake a node. If you lack the expertise, we can run noncustodial nodes for clients with enough DOT or KSM to run their own nodes.
